Stock markets took an unexpected beating at the end of last week and have a lot to recover in the week ahead if they are to reclaim the multiyear highs we saw in the middle of January. A slowdown in the Chinese manufacturing sector was identified as the culprit that spooked investors out of equities and this week we\’ll get more news on the country\’s oh-so-important manufacturing industry.

The final HSBC manufacturing purchasing managers\’ index is out on Thursday and expect investors to be looking for further clues if the sector really has been slimming down in January. The preliminary reading showed a drop to 49.6 — contraction territory — which came as a surprise to most analysts.

But other than that, this week is a bit shy on data from the world\’s second largest economy. The trade off? A raft of numbers and events from Europe and the U.S. that also have the potential to sway the financial markets. Think U.S. GDP, Fed meeting, euro-zone inflation figures. Topping it all off are the latest updates from the corporate sector, with big companies such as Siemens and Hennes & Mauritz reporting. The earnings season hasn\’t been all that great — of the Stoxx Europe 600 companies that have reported so far, the majority have missed sales expectations.

Euro-area inflation numbers: Inflation — or the lack of it — has been one of the main characters on the macroeconomic scene in recent months and chatter about a possible rate cut from the European Central Bank has started to emerge. The January inflation data out on Friday are expected to show a slight rise in the consumer price index to 0.9% from 0.8% in December. There are caveats though. The change is expected to stem mainly from a rise in French VAT on Jan. 1, and the headline inflation number should fall back to about 0.8% in February.

Analysts at Barclays said in a note they expect the ECB to cut the main refinancing rate by 15 basis points at the February or March meeting in response to increasing deflation fears. More non-traditional measures could also be in the cards:

\”Should deflationary pressure increase in the coming months, we think an asset-purchase program would be required to effectively dispel the specter of deflation,\” the analysts said.

Euro-area unemployment: The joblessness level in the euro zone has been stubbornly high in most of 2013 and there are few signs of an improvement in the data for December out on Friday. Most forecasts call for another month at a record high 12.1%, which would be the ninth straight month at that level.

RBC Capital Markets analysts are a tad more optimistic and see the unemployment level drop to 12% on the back of some better-than-expected national data.

\”While only a marginal retreat, this would symbolically represent the first fall in three years (barring any revisions to back data). Overall, however, the pace of activity in the euro area is unlikely to make a serious dent in the unemployment picture over the near term,\” they said in a note.

U.K. GDP: There is an endless stream of strong data out of the U.K. these days, highlighted last week by the joblessness rate for the three months to November dropping more than expected to 7.1%. This week should bring some more important growth news for the U.K. with the first estimate on fourth-quarter GDP in the pipeline for Tuesday. The Bank of England has predicted 0.9% economic growth in the final three months of 2013, but Philip Shaw, chief economist at Investec Securities, expects a slowdown to 0.7%. In the two previous quarters, the economy expanded by 0.8% each period, but with construction output falling and industrial production stagnating in November, a lower growth rate \”seems likelier\” in the fourth quarter, Shaw said.

U.S. GDP: Across the pond, U.S. fourth-quarter GDP numbers on Thursday will be one of the main attractions. After a stellar expansion rate of 4.1% in the third quarter, expectations are for a bit of a slowdown to 3.3%.

Fed meeting: Before growth numbers take center stage, the Federal Reserve will claim the limelight. On Tuesday and Wednesday, the U.S. central bank meets in what will be Ben Bernanke\’s final meeting as chairman before Janet Yellen takes the helm on Feb. 1. Last month, the Fed announced the first steps to reduce its aggressive bond-buying program after months of speculation and further tapering steps are expected this week. Officials are likely to agree on another $10 billion cut, which will bring the monthly purchases down to $65 billion. Not even the poor December jobs report is likely to change this. Read the full preview.

Earnings:Corporate results are also likely to keep investors busy in both Europe and the U.S. in the week ahead. A key company to watch in Europe will be Royal Dutch Shell\’s
fourth-quarter results on Thursday, given its recent profit warning. Heavyweights in the drug sector are also on the earnings calendar, with Novartis
reporting fourth-quarter earnings on Wednesday followed by insulin-maker Novo Nordisk\’s
full-year statement on Thursday.

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